Apple Bears Are Totally Forgetting How Hard Break-Ups Are

The Street will probably be talking about Apple's latest, lousy earning's call for a while. So, as is only fair, the bears will have their say.

The stock took a nose dive this week on the news that iPhone sales came in light by about 3.2 million units. In fact, as Business Insider's Jay Yarow reported, the stock generally missed the expectations of buy-side investors across the board.

There are dissenters though. SumZero, a start-up that provides a forum for buy-siders to share their research and connect with one another, sent Business Insider an interesting bullish take on Apple that has nothing to do with iPhone sales — it has to do with Apple users.

David Einhorn observed that AAPL can be thought of as a software company (iOS, OS X, the App store, ITunes, iCloud) that drives earnings through recurring update/upgrade cycles for its hardware products that access that software. The company’s wide range of products, united by their reliance on the iOS operating system, creates an economic moat for the company, since users are reluctant to leave the AAPL product ecosystem, due to high switching costs. This arrangement is an additional source of pricing power as it enables AAPL to maintain or grow margins for its hardware, based on captive demand for the software platform. The typical AAPL customer might have an array of applications, and a content library that includes music and photos, and it is expensive and challenging to migrate these to another platform. iCloud may be a natural extension of this strategy, as the consumer’s hard drive contents and libraries and share them across all of AAPL’s devices.

Empiritrage goes on to point out that then company is really profitable, has strong returns and cash flows, and also happens to have an amazing brand.

Coupled with the fact that break ups are miserable, they're calling this company a great long.